10-1
Unit 10
State Payroll Taxes and Reports
McGraw-Hill/Irwin
Copyright © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
State Unemployment Compensation
• Social Security Act of 1935:
– established the federal unemployment insurance
system,
– states set up their own unemployment insurance
programs.
– state programs operate in partnership with the
federal system.
10-3
Copyright © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
State Unemployment Compensation
• State programs:
– Each state maintains:
– local unemployment insurance offices that handle the claims
from jobless workers,
– check those claims,
– and pay benefits.
– Each state sets its own rules:
– with regards to eligibility
– amount of benefits,
– and length of the payment period.
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State Unemployment Compensation
• SUTA Tax and FUTA :
– the federal government allows a credit of up to 5.4%
of the state unemployment insurance (SUTA) tax to
be paid by the employer.
– the amount of FUTA tax actually owed may be as
low as 0.8%
– (6.2 percent — 5.4 percent = 0.8 percent).
– The tax rates imposed by state unemployment
compensation laws vary.
10-5
Copyright © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
State Unemployment Compensation
• SUTA Tax:
– states have an experience-rating (or merit-rating)
plan that affects the amount of SUTA tax employers
pay.
• formula used to determine experience ratings varies from
state to state,
• some states allow employers to make voluntary
contributions in order to obtain better ratings.
– SUTA tax computed and paid on a quarterly basis.
10-6
Copyright © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
State Unemployment Compensation
• SUTA Tax Example:
Here is how the SUTA tax would be computed:
$ 49,084 total taxable earnings of employees
x .021 applicable SUTA tax rate
$1 ,030.764 = SUTA tax
10-7
Copyright © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
State Unemployment Compensation
• Unemployment Benefit Claims (California) :
– The state immediately sends a notice of claim to that
person’s last employer.
– Applications are made at one of the state’s many
employment development offices.
– The employer verifies the information.
10-8
Copyright © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
State Unemployment Compensation
• Unemployment Benefit Claims (California) cont.
– A state unemployment counselor interviews the claimants.
– Focus of the interview is to determine the reason why the
claimant lost his or her job.
– Only claimants who are unemployed through no fault of their
own are entitled to benefits.
– Claimants who have been discharged for misconduct or
voluntarily quit do not receive unemployment benefits.
10-9
Copyright © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
State Disability Insurance Tax
• State Disability Insurance
Tax:
– an employee who is unable
to work because of nonrelated:
– illness,
– injury,
– or accident.
• In some states, both
employers and employees
pay disability insurance tax
10-10
Copyright © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
Workers Compensation Insurance
• Workers compensation insurance:
– developed to protect employees and their families
against the loss of income that results from jobrelated injuries, illnesses, or even death.
– Most states have laws requiring employers to
provide workers compensation insurance for their
employees.
10-11
Copyright © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
Workers Compensation Insurance
• Premiums on Workers Compensation Insurance,
– one common practice is for employers to pay the
insurance company an estimated premium at the
beginning of each year.
– The estimated premium is based on the rate for each
type of employees and the estimated amount of their
wages for the year.
– At the end of the year, the premium is adjusted
according to the actual payroll for the year.
10-12
Copyright © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
SPECIAL STATE PAYROLL TAXES
• Special kinds of state taxes for employers:
– California imposes an Employment Training Tax
(ETT), which is paid by employers on a quarterly
basis.
• This tax is used by the state to finance training for both
employed and unemployed workers.
• The rate of the ETT is 0.1 percent (.001) of the first
$7,000 earned by each employee during a calendar year.
10-13
Copyright © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
State Income Tax
• State income taxes:
– Each state determines:
• the rates used,
• the depositors schedule,
• and the tax forms to be filed
• Obtaining information about State Income Tax
– Most states publish a tax guide for employers.
10-14
Copyright © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
State Income Tax
• Depositing and Reporting State Withholding Taxes:
– forms and procedures used to deposit and report the various
withholding and payroll taxes differ from state to state.
– The payroll-related taxes in California are:
•
•
•
•
Unemployment Insurance (SUTA, which is called UI in California)
Employment Training Tax (ETT)
State Disability Insurance Tax (SDI)
California Personal Income Tax (PIT)
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Copyright © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
State Income Tax-CA
• SDI and PIT deposits:
– by electronic funds transfer (EFT).
– employers who owed more than $20,000 in the last
lookback period (July 1 to June 30) are required to
use EFT.
– A special bulletin is available explaining how the EFT
system in California works and what employers must
do to join the system.
10-16
Copyright © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
State Income Tax-CA
• Due Dates for Depositing State Withholding and
Payroll Taxes:
– employers are classified based on their federal
status as:
– next banking day,
– semiweekly,
– monthly,
– quarterly depositors.
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Copyright © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
State Income Tax-CA
10-18
State Income Tax-CA
• Quarterly Wage and withholding report:
– Form DE 6, Quarterly Wage and Withholding Report.
• provide in formation about the wages paid to each
employee during the quarter and the California personal
income tax (PIT) withheld from those wages.
• The due dates for filing are April 1, July 1, October 1, and
January 1.
• must be submitted even if no wages were paid to
employees during the quarter.
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Copyright © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
State Tax- CA
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State Income Tax-CA
• Quarterly Wage and withholding report:
– Form DE 6, Quarterly Wage and Withholding Report.
• provides information about:
– wages paid during the quarter
– California personal income tax (PIT) withheld .
• The due dates for filing are 4/1, 7/1, 10/1, 1/1.
• Must be submitted even if no wages were paid to
employees during the quarter.
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Copyright © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
State Income Tax-CA
• Form DE 7 (Annual Reconciliation Statement):
– report is due on January 1 of each year and
delinquent on January 31.
– purpose is to reconcile the various state payroll and
withholding owed for the year with the amounts
deposited during the year.
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Copyright © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
State Income Tax-CA
10-23
State Income Tax-CA
• WAGE AND TAX STATEMENTS
– California required that employers submit a copy of a
W-2, to report the state income tax withheld from the
employee’s earnings during the year.
– must also list the California Disability Tax withheld
(CASDI).
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Copyright © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
State Income Tax-CA
• LOCAL INCOME TAX
– cities and counties impose an income tax on
residents who work within their boundaries.
– local governments publish tax guides for employers.
•
•
•
•
provide detailed information about:
regulations,
forms,
and payment deadlines.
10-25
Copyright © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
Setting Up a Payroll Calendar
• Calendar of payroll activities:
– is an important tool
– surest way to avoid missing the date for making a
tax deposit or filing a tax report is to set up and use a
payroll calendar.
– It is helpful if calendar also includes the dates when
the payroll must be computed and checks must be
issued.
10-26
Copyright © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
Setting Up a Payroll Calendar
10-27
Unit Summary
10-28
Questions?
10-29